The Daily Item, Sunbury, PA

January 26, 2014

State faces $600M jump in pension costs

By John Finnerty
The Daily Item Harrisburg Bureau

LEWISBURG — HARRISBURG — Most lawmakers say the state’s pension plan needs fixing, but it’s extremely unlikely any solution will touch benefits for current employees — including the legislators themselves.

The state faces a $600 million spike in pension costs in the coming 2014-15 budget. Without reducing that, state agencies and programs face flat-funding or cuts, Senate President Pro Tem Joseph Scarnati, R-Jefferson, said.

Gov. Tom Corbett first proposed reducing the pension bill by changing how benefits are calculated for existing employees, but lobbyists and lawmakers say any reform that passes this spring is likely to affect only new employees.

Rep. Richard Stevenson, R-Mercer County, said a move to change benefits for current employees would probably bog down in court. Even if the state were to prevail, Stevenson said any savings wouldn’t be immediately available for next year’s budget.

Stevenson is personally affected by what the Legislature decides to do. He is among 234 lawmakers who contribute to the pension and one of 12 who have announced their retirements at the end of the year.

But Stevenson — who will collect about $31,000 per year from his pension, according to government payroll and State Employee Retirement System records — said that doesn’t affect his views.

“I knew that pension reform was going to be an issue before I decided to retire,” he said.

Sen. Bob Robbins, R-Mercer County, who has 31 years of service in the Legislature and a leadership post that boosts his pay to $95,797, is poised to receive about $74,000 a year.

Benefits are based on salary and tenure in state government. Other factors — such as an option allowing an individual to take a lump-sum payment — affect the package as well.

Stevenson said changing benefits for lawmakers wouldn’t make much difference. The 253-member Legislature is a small fraction of the 386,000 state and public school employees who contribute to the two main public pension systems.

That argument doesn’t wash with Tim Potts, a school board member from Carlisle who is active in government reform efforts in Harrisburg.

“In a perfect world, the Legislature would have its own pension,” Potts said, because it would allow the public to see the benefits that lawmakers give themselves.

Inclusion in a larger plan shields lawmakers from criticism, he said, because they can argue the benefits are primarily for teachers and other state workers.

“They need a fig leaf,” he said.

The Legislature previously has changed benefits midstream, though mostly to improve perks, Potts noted. For instance, lawmakers altered pension rules so that someone becomes eligible to collect after three years on the job. That means senators can get into the pension, or “vest,” during the first four-year term, and a representative can vest in the second two-year term.

Nathan Benefield, vice president of policy analysis for the conservative-leaning Commonwealth Foundation, said lawmakers are loathe to face state workers and teachers after changing their benefits.

But if the Legislature doesn’t come up with a solution, Benefield said, it will continue to face this problem.

Poor investment performance and chronic under-funding have widened the unfunded liability for the two major public pensions to $47 billion, he noted in an email. Lawmakers will face having to cover growing contributions to those pensions for the next few years.

“The pension crisis is one of the most important short-term and long-term issues facing the state,” said Benefield, who added that all lawmakers — retiring or not — should be concerned.

“We should not keep transferring the costs of today’s pension promises onto our kids and grandkids,” he said.